Governments drug price caps may trigger showdown with US

By Rupali Mukherjee, TNN Jul 31, 2018, 10.22 AM IST

Governments drug price caps may trigger showdown with US

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MUMBAI: US pharma biggies are at the receiving end of the Donald Trump administration’s ire due to rising drug prices in that country, and this may cause anxiety for the Indian government as well as domestic generic companies. Unlike in the past, Washington is increasingly putting the blame for high costs of medicines in the US on lower prices or pricing caps in other countries, effectively implying that US consumers were subsidising drugs for others. Given this stance, recent attempts by the by the Indian government to rein in drug prices could now become a bone of contention between the two countries, according to analysts.

A case in point: Strong lobbying employed recently by US medical device makers against pricing caps on heart stents may just be the beginning of protracted efforts by the US pharma industry to ensure that Indian drug price controls do not affect these companies, the analysts added.

Further, domestic companies have already been facing a tough environment in the US due to pricing pressure, which may also intensify this year. India contributes around 30% of overall volume of drugs consumed in the US, with generic companies including Sun PharmaNSE 1.02 %, LupinNSE 2.08 % and GlenmarkNSE 0.77 % exporting 40-50% of their overall sales.

On its part, the Indian government — through drug price regulator National Pharmaceutical Pricing Authority (NPPA) — fixes ceiling prices on essential medicines. Till June this year, the government has capped prices of 851 medicines (including four medical devices — cardiac stents, drug-eluting stents, condoms and intra-uterine devices).

With the Trump administration taking exception to lower drug prices outside the US, it is now increasingly likely that the ongoing measures by the Indian government to cap costs of medicines may become a source of a potential showdown between the two countries, a note from financial services firm Emkay GlobalNSE -0.47 % said.

The recent price rise in the US pharmaceutical industry has drawn a sharp reaction from President Donald Trump with a pledge to respond with appropriate measures. It is learnt officials from the Trump administration recently issued a blunt warning to industry chief executives on the soaring prices of their medicines.

According to news reports, several US pharma companies have taken price hikes in recent days across branded as well as the older genericised portfolio. But companies like PfizerNSE -0.09 % were forced to roll back the price increase on certain medicines after facing sharp criticism from the US government.

The US administration feels high drug prices end up subsidising R&D for patients across the world, the note says. To counter this, the Trump administration plans to support the US pharma industry’s endeavour to aggressively enforce patents globally. This may also impact the Indian government’s policy on compulsory licensing, with its Patents Act becoming an issue between the two governments, analysts said. They added that, even otherwise, “We expect greater friction between the two governments over access to the Indian pharma market, including price controls".

Last year, after the pricing caps on stents were announced, the US Trade Representative reportedly wrote in September to the Indian government, urging them “to not expand price controls to additional medical devices”. However, the request appears to have been ignored with the government recently deciding to restructure the National List of Essential Medicines, an exercise which may include more drugs and medical devices coming under pricing caps.